TaxTMI 
TaxTMI 
2009 (4) TMI 323
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....ute 1. E/02/2006 M/s. Sujana Metal Products Ltd. (formerly known as Sujana Steels Ltd.) Casting Division v. The Commissioner of Customs & Central Excise, Hyderabad-I Commissionerate Duty: Rs. 67,87,021/- Recovery of Rs. 1,91,676/- irregularly availed as Modvat credit on HM Scrap. Redemption Fine : Rs. 10,00,000/- Penalty : Rs. 10,00,000/- Interest on Rs. 67,87,021/- u/s 11AB Interest on Rs. 1,91,676/- u/r 57-I(5) 2. E/03/2006 Mr. Y.S. Chowdary, Chairman M/s. Sujana Steels Ltd. v. CC&CE, Hyderabad-I Penalty of Rs. 5,00,000/- 3. E/04/2006 Mr. R.K. Birla, Director (Operations) v. CC&CE, Hyderabad-I Penalty of Rs. 3,00,000/- 4. E/05/2006 Mr. C.H. Jawahar Babu, Chief Executive v. CC&CE, Hyderabad-I Penalty of Rs. 3,00,000/- 5. E/06/2006 Mr. P. Surendra v. CC&CE, Hyderabad-I Penalty of Rs. 3,00,000/- 6. E/07/2006 Mr. G. Rama Krishna v. CC&CE, Hyderabad-I Penalty of Rs. 3,00,000/- 7. E/08/2006 Mr. P. Mallikarjuna Reddy, Chief Executive v. CC&CE, Hyderabad-I Penalty of Rs. 3,00,000/- 8. E/09/2006 Mr. M.K. Chaturvedi, Sales Manager v. CC&CE, Hyderabad-I Penal....
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....ng Units of SSL are situated at Plot Nos. 296/7/9 and 159/8 and C, IDA, Bollaram, Hyderabad. They procure H.M.S./Shredded Scrap mainly by way of imports through Madras Harbour and utilize the same for melting, for the manufacture of M.S. Ingots at their Casting Division. In respect of their Re-rolling Units, the raw material namely Re-rollable scrap was also procured by way of imports and also by purchasing local scrap from various local scrap dealers. 4.1 Detailed investigation was conducted with regard to the activities of the assessee's units and others, who are the noticees. This culminated in the issue of two Show Cause Notices - one dated 17-1-1997 issued by the Commissioner of Central Excise, Hyderabad and the other dated 2-5-1997 followed by a Corrigendum dated 3-9-1997. Both these Show Cause Notices were adjudicated by the Commissioner of Central Excise, Hyderabad and a common order was passed in the impugned Order-in-Original. The main charge in the first Show Cause Notice relates to the clandestine production and removal. The Commissioner has dealt with all the aspects and came to the conclusion that the assessees are liable to pay a differential duty amounting to Rs.....
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....a was paying by Cheques and Pay Orders only. They were supplying MS Scrap not only to SSL Casting Division but also to SSL Trading Division, Bollaram. However, it is difficult to tell how much quantity was supplied to SSL, Casting Division and SSL, Trading Division in the absence of records, which were seized by the Department. Mr. Azizuddin has also given similar statements. 4.3 It was further stated that the Department has included alleged purchase of scrap during the period 1996-1997. It was submitted that the impugned period of the SCN is 1993-94 to 1995-96. Our attention was invited to Table No. 1 in internal page no. 37 of the SCN dated 17-1-1997. It was also stated that the party had not imported any HM Scrap during the said period. It is the contention of the learned Advocate that Table 1 mentioned in page 116 of the paper book or internal page 37 of SCN dated 17-1-1997 includes the purchases made by SSL (Casting Division) as well as SSL (Trading Division). When the Purchase Invoices of M/s. Pirani Steels and M/s. Mawani & Co. were produced during cross-examination, both Mr. Murad and Mr. Azizuddin admitted that they sold local scrap both to SSL (Casting Division) as ....
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.... - 2002 (140) E.L.T. 187 (T) (b) Ghodavat Pan Masala Products v. CCE, Pune - 2004 (175) E.L.T. 182 (T) (c) Essvee Polymers (P) Ltd. v. CCE, Chennai - 2004 (165) E.L.T. 291 (T) (d) Parushram Cements Ltd. v. CCE, Lucknow - 2003 (160) E.L.T. 213 (T) (e) K. Rajagopal v. CCE, Madurai - 2002 (142) E.LT. 128 (T). 4.5 Assuming but not admitting that the appellant-company had manufactured Ingots weighing 2342.250 MTs. on which duty of Rs. 30,85,985/- has been demanded, the learned Commissioner ought to have given Cenvat credit of the said amount before arriving at the net duty payable by the appellant-company. However, he has not given any such credit, to which the appellants were entitled. The following case-laws were relied on :- (a) Chamundi Steel Re-rolling Mills v. CCE - 1996 (81) E.L.T. 563 (b) Vivek Re-rolling Mills v. CCE - 1994 (73) E.L.T. 660 (T) (c) Apex Steels (P) Ltd. v. CCE - 1995 (80) E.L.T. 368 (d) Railtech v. CCE - 1996 (85) E.L.T. 267 (CEGAT 3 Member Bench) (e) Phoenix Mills v. CCE - 1999 (113) E.L.T. 1018 (T) In the decisions cited above, it has been inter alia held that if the product is held to be excisable and chargeable to duty, the as....
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....ed on the executives of Sujana Steels Ltd. in addition to penalty imposed on Sujana Industries Ltd. is also not maintainable in law. Further, it was stated that even according to the Show Cause Notice, only Mr. R.K. Birla, Director (Operations) of SSL alone dealt with the transactions which pertain to local scrap sold by M/s. Pirani Steels and M/s. Mawani & Co. Therefore, it was urged that the appellant-company as well as their various Executives have not violated the provisions of Rule 209A of the Central Excise Rules. Further, no specific allegation has been made against the said Company or each one of the Executives that they had knowledge or had reasons to believe that they were dealing with such excisable goods, which were liable for confiscation under the Central Excise Act, or the Rules made thereunder. The following case-laws were relied on :- (a) Killick Nixon Ltd. v. CCE, Aurangabad - 1998 (97) E.L.T. 436 (T) (b) Standard Pencils Pvt. Ltd. v. CCE, Madras - 1996 (86) E.L.T. 245 (T) (c) Tolaram Electronics & Ors. v. CCE, Ahmedabad - 1999 (108) E.L.T. 277 (Tribunal) = 1999 (33) RLT 558 (T) (d) Ashok India Engineering Works v. CCE, Bombay - 1998 (98) E.L.T. 659 (T....
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.... assumptions/presumptions. The employees of the Group have admitted the excess receipt of scrap and un-accounted manufacture of ingots/re-rolled products based on the documentary evidence shown to them during investigation. Suppliers of scrap have also admitted the fact of sale of scrap shown in the relied upon documents. The buyers of the finished goods have also admitted the receipt of the finished goods without proper documents and payments made in cash. (8) (a) As per private records recovered from the residence of Shri Muralidharan, Production Manager, production particulars over and above the RG-I stock of SSL, for the year 1994-1995 alone, was 8521.235 MT for RM II and 6720 MT for RM I. (Annexure III and IIIA to the SCN dated 17-1-97). (b) As per the Bills of the Labour Contractor, Shri A.K. Ranu, the difference between RG-I figures and actual production for which he was paid labour charges, for 14 months, was 6182.192 MT (Annexure IV of SCN dated 17-1-97). (c) Shri Ranu has in his statements dated 11-10-96 and 12-11-96 confirmed suppression of production and clandestine clearances. These pieces of evidence clearly indicate that SSL was systematically suppressing producti....
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....ash transactions to say that the said quantity of scrap was sold in and around Chennai and M/s. SSL created certain documents to project the transportation of the same to their factory at Hyderabad with an intention to irregularly avail Modvat credit on the same. In fact, it was mentioned in the Show Cause Notice that the vehicles under which scrap claimed to have been transported to Hyderabad were found to be non-transport vehicles viz., fire tender, motor cycle, taxi etc. When such overwhelming evidence was available on record to prove that the goods under reference never reached the factory of M/s. SSL, the Commissioner ought not to have considered the end use certificate alone while deciding the aspect of irregular availment of Modvat credit. If the Commissioner felt it is reasonable to consider the so called end use certificates under reference, he also ought to have given his findings as to how the noticees could bring huge quantity of scrap from Chennai to Hyderabad using non-transporting vehicles. However, the Commissioner's order is totally silent on this aspect. In the circumstances, it appears that the order of the Commissioner as far as non-confirmation of recovery of R....
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....cheme, which the appellants are entitled to sell. (3) 14 end-use certificates were produced before the Commissioner, which indicated the utilization of the aforesaid scrap in the various manufacturing units, including the units of the Sujana group. (4) None of the witnesses knew about the nature of the scrap. (5) The respondents had filed D-3 declarations with the jurisdictional officers, who verified the receipts from time to time. (6) Form XXAs (for sales tax purposes) were filled with wrong particulars by the C&F agents. (7) Several documents were asked for, which have not been provided. 7. Shri Ramanan made the following submissions :- The records maintained by the employees of the respondent-companies were removed to the residential premises of Shri Madhusudan Rao, DEO, a few days before the searches were conducted but were seized by the Department. These records were shown to the employees and statements were recorded. Full details are given in the 'Statements of grounds' to SCN dated 2-5-97. (1) The subject scrap consignments, after import at the Madras Port, were moved to the godowns of the respondents located at Puzhal, Vanagaram, Gummidipoondi, Ton....
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...., etc. * Periodical Fax messages were sent to Shri Y.S. Choudhary, Chairman, indicating the disposal and realization of sale proceeds. The respondent has not offered any comments on the aforesaid documentary evidence. (5) The Department has not objected to the sale of the subject scrap imported under the DEEC and this issue has never been contested. (6) The End-use Certificates merely state that they are 'as verified from R.G. 23-A Part I'. Since the respondents have fabricated "paper transactions", through fake documents, to show that the goods have moved to Hyderabad under purportedly normal transport documents, these certificates cannot be taken to prove the actual physical receipt of the said scrap. In any case, the evidence at para 4 above convincingly proves that the said scrap was disposed of at Chennai itself and that fake documents were prepared to show the movement of the said scrap to Hyderabad. Accordingly, these certificates do not reflect actual receipt and consumption of the subject scrap. Reliance is placed on the judgment of the Hon'ble Bombay High Court in Roopkala Export Corporation v. UOI reported in 2004 (165) E.L.T. 26 (Bom.). (7) The documents bei....
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.... to be seen in the totality of the circumstances. Private records have been recovered from the residence of Shri Muralidharan, Production Manager and the Bills of the Labour Contractor, Shri A.K. Ranu have also been scrutinized. Shri Ranu has, in his statements, dated 11-11-1996 and 12-11-1996, confessed suppression of production and clandestine clearance. All these evidences point to the fact that SSL was systematically suppressing production of Ingots and Rolled products. In our view, there is enough circumstantial evidence to hold unaccounted production in respect of 2602.500 MTs. Even though, the original demand was very huge, the Commissioner has scaled it down only to the demand on account of non-accountal of 2602.500 MTs of scrap. In our view, it is a very fair decision and his order is sustainable. But, however, we find that he had not given any allowance for the Modvat credit. According to him, the scrap is converted into Ingots and the Ingots, in turn, is used in the production of re-rolled products. So, while coming to the conclusion on demand of duty, he has not given the benefit of Modvat credit and also the cum-duty benefit. In terms of the Hon'ble Supreme Court's dec....
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.... carelessly and the concerned staff members might have committed mistakes in giving the End Use Certificate. Therefore, he has to look into the other evidences also. If the other evidences point out to the diversion of the imported scrap, then that cannot be ignored. In the present case, the Commissioner has ignored all the other evidences. Therefore, we have no other option but to remand the matter to the jurisdictional Commissioner for de novo adjudication and after giving a finding, he can impose suitable penalties. 10. Summing up, as far as the assessees' appeals are concerned, we have only accepted their plea that the Modvat/Cenvat benefit has to be given and also the benefit of cum-duty value. The value, which is taken in respect of the clandestine clearance, should be taken as cum-duty and the duty liability has to be recalculated. On re-calculation, suitable penalties may be imposed on the Noticees. As regards the penalties, we are not giving any finding because on computation of the duty liability and also after hearing the parties concerned, the commissioner can impose the penalties in accordance with law. 11. The entire impugned order considers two Show Cause Notic....
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....can decide about the leviability of penalties on these three persons. In any case, the penalties imposed in respect of the persons from Sl. No. (viii) to Sl. No. (xv) and also Sl. No. (xvii) on A.K. Ranu will depend upon the result of the de novo re-computation/re-adjudication in respect of the two Show Cause Notices respectively. This paragraph is given for clarifying our order. 12. As regards the Revenue's appeal, we are allowing it, in the sense, that we set aside the Commissioner's order regarding the acceptance of the End Use Certificate issued by the Departmental authorities. The Commissioner has to pass a de novo order. In view of the above findings, the entire order is set aside for de novo adjudication in the light of our observations made above. The de novo adjudication should be completed within a period of four months. The issues relating to penalties are kept open. Thus, the appeals of both Revenue and Parties are disposed of in the above manner. 13. In sum, the appeals are disposed of in the following manner:- Assessees' Appeals: Sl. No. Appeal No. Decision 1. E/02/2006 Remanded to the Original Authority for re-quantification of duty in the ....